Question
In: Finance
Suppose the returns on long-term corporate bonds are normally distributed. The average annual return for long-term...
Suppose the returns on long-term corporate bonds are normally distributed. The average annual return for long-term corporate bonds from 1926 to 2007 was 6.7 percent and the standard deviation of those bonds for that period was 9.4 percent.
| (a) | Based on this historical record, what is the approximate probability that your return on these bonds will be less than -3.6 percent in a given year? (Do not round intermediate calculations.) |
(Click to
select)14.21%12.98%13.66%14.34%27.32%
| (b) | What range of returns would you expect to see 95 percent of the time? (Do not round intermediate calculations.) |
(Click to select)-12.10% to
25.50%-21.50% to 34.90%-11.49% to 24.23%-12.70% to 26.78%-4.00% to
22.80%
| (c) | What range would you expect to see 99 percent of the time? (Do not round intermediate calculations.) |
Solutions
Expert Solution
SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE
jeff jeffy answered 10 months agoRelated Solutions
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Annual and Average Returns for Stocks, Bonds, and T-Bills, 1950 to 2015. Stocks Long-Term Treasury Bonds...
Annual and Average Returns for Stocks, Bonds, and T-Bills, 1950
to 2015.
Stocks
Long-Term Treasury Bonds
T-bills
1950 to 2015
Average
12.6
%
6.6
%
4.40
%
1950 to 1959
Average
20.9
0.0
2.00
1960 to 1969
Average
8.7
1.6
4.00
1970 to 1979
Average
7.5
5.7
6.30
1980 to 1989
Average
18.2
13.5
8.90
1990 to 1999
Average
19.0
9.5
4.90
2000 to 2009
Average
0.9
8.0
2.70
2010
Annual Return
15.1
9.4
0.01
2011
Annual Return
2.1
29.9...
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